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Abstract
This Article documents the rise of third-party funding in patent litigation. We track funding sources for patent lawsuits in the United States from 2002 to 2021, which show an increase in cases and percentage funded by third parties. While we cannot say third-party funding increased patent litigation, we can observe the correlation. The use of the champerty doctrine by patent trolls distorts the marketplace and causes frivolous litigation.
The secondary patent market created a robust litigation market in which non-practicing entities (NPEs) can buy from innovators and sue defendants. Capital investments bet on litigation, hoping for a return without interest in underlying innovation. Litigation growth drains welfare and creates taxes on innovation: Companies spend resources to counteract trolls. Patent policy is imperfect: It grants monopolies to innovators and promotes rent-seeking and lobbying.
Other than abandoning patent policy, the best solution is for courts to request disclosure of third-party funding arrangements in litigation. Allowing voluntary disclosure increases transparency in the arrangements behind patent litigation. Juries factor these into their decisions about protecting the rights of innovators. Disclosure has improved governance and reduced asymmetries in capital markets and could similarly affect litigation: Unnecessary litigation decreases, and third-party funding resumes supporting under-resourced innovators.
Recommended Citation
Korok Ray & Adam Olson, Third-Party Funding of Patent Litigation: Problems and Solutions, 2025 ULR 915 (2025).